Warranty obligations are estimated in order to recognize the obligation at the balance sheet date and to charge the expense to the period of the sale.

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This statement is true. When a company sells a product with a warranty, it incurs an obligation to provide repairs or replacements if the product fails during the warranty period. To account for this obligation, the company estimates the expected cost of fulfilling warranty claims and records the estimated expense as a liability on its balance sheet. The expense is also charged to the period in which the sale was made as an offsetting entry to revenue.

Warranty Obligations Are Estimated in Order to Recognize the Obligation